Europe Real Estate Heading for a Train Wreck

As the Economy Sags, Rents Are Likely to Fall, While Vacancies Rise

BERLIN -- Bad news for European real-estate investors and lenders who have just struggled through 2008: Next year will likely be even worse.

As bad as this year has been, most owners have been able to generate enough rental income to stay current on their mortgages. While rents have fallen, the biggest problem has been the evaporation of credit, which has jammed the brakes on the sales market while making refinancing difficult, if not impossible.